It can be challenging to overhaul your finances. We are confronted with an array of financial options and it can be difficult to know which way to turn. Many of us are in debt and afraid to acknowledge our financial trouble. Keeping on top of your finances doesn’t have to be overwhelming, however. There are some simple ways to overhaul your finances.

1. Save money each month

Set up an emergency fund by saving a set amount of money every month and putting it in a separate savings account. This can be as little as $5 or $10 per month, but obviously the more money you save, the more you will have if an emergency crops up and you suddenly need the extra cash. You might consider having a certain amount of money deducted from your paycheck each month and deposited into a savings or retirement account. You can also put your spare change in a jar as a way of generating a little extra cash. As the saying goes, "every little bit helps."

2. Join the company pension plan

Being part of your company's pension plan is a good way of saving for your future retirement, but many of us dont actually contribute to it. The 401(k) plan takes money out of your paycheck before taxes, which means that your taxes are reduced. You aren't taxed on this money until you begin using it in your retirement.

You can decide how much money you want deducted from your paycheck before you start the plan. If you aren’t currently a member of your company's 401(k) plan, the human resources department in your company can give you information on how to enroll.

3. Set aside time to manage your bills

Time is one of the biggest hurdles when it comes to trying to overhaul your finances. Most of us are so busy with the rest of our lives that keeping on top of our financial situation often gets pushed aside. The task becomes a lot less daunting if you divide it into segments. For example, you can set aside half an hour to sort out all of your bills for the week and another half an hour to sort through your checkbook and make a note of what has been paid and withdrawn. It's also helpful to spend some time entering your expenses into a spreadsheet to show how well you're sticking to your budgeting plan. By spending just an hour and a half a week, you can really overhaul your finances.

4. Reduce regular expenses

Find out which regular household expenses are costing you the most money every month and look for ways to save money on them. For example, you might want to do your grocery shopping at a different supermarket for a while to see how much money you can save.

For household items, look on price comparison websites to find the stores that are selling them for the cheapest price. This can be misleading though. If the store in question is out of town, you will have to spend more money on gas to get there which means that it might end up costing you about the same in the end if you had just continued shopping at your neighborhood grocery store. It's best to concentrate on the items that are costing you a significant chunk of your income each month - don't waste time trying to save fifteen cents on diapers, as this will make little impression on your overall household expenses by the end of the month.

5. Use cash to pay for small expenses

It's tempting to put everything on your credit card, but this will only create more financial problems. According to moneycentral.msn.com the average American household has approximately $8,000 of credit card debt. When you pay off your credit cards, it is unlikely that you will remember all of the small expenses you used your credit card for. Use cash to pay for small expenses such as gas, magazines and sweets for the children. Work out how much you can spare for your weekly cash fund and make sure that you stick to it. If you don't think your willpower will stretch that far, leave the credit cards at home.

If you only have twenty dollars in your pocket, you won't be able to splurge on things that arent a necessity. If you do this on a regular basis, you might be surprised at how many items you buy that you don't really need.

6. Stick to your budget

Work out how much you can afford to spend and stick to this budget. Many people find that their monthly expenses equal more than their income and this is why so many of us are in debt. We spend more than we can afford and find out later that we have no real means of paying back this debt. You can avoid this nightmare by sticking rigidly to your budget so that you don't spend more than you have. It's essential that you keep track of your income and expenses so that you're always on top of your financial situation.

When devising your budget, it's useful to keep your receipts from the last six months. This allows you to instantly see exactly where the money went and it can help you to factor in hidden expenses such as repairs to the car and house. You might find that you're spending a good chunk of your income on frivolous items such as coffee every morning on your way to work. Over time, these expenses add up.

7. Check your credit rating

Your credit rating can have a big effect on your financial future.

Lenders use your credit rating to decide how risky it will be to lend you money. A poor credit rating can lead to being refused credit when you want to buy something expensive such as a car or home. To improve your credit rating, pay off your credit card debts as soon as you can - the more debt you have, the worse your credit rating will be. Paying off your loans and credit card debt will show the lenders that you can be trusted to repay your credit on time.

8. Sell your junk

Hold a garage sale to get rid of your unwanted junk. Not only will it create a lot more space in your house, it will also generate some extra cash.

When you begin to overhaul your finances, it's important to tackle your debt before you start saving for the future. Being in debt can affect your credit rating which will affect your ability to obtain credit when you need it. Once you've paid off your debts, these tips should help you to avoid getting into debt again and help you keep track of your finances.

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